How chemical companies can harness these opportunities

Overview

Innovations in energy (such as tapping shale gas) and automation, as well as rising labor costs in China are changing the investment patterns of chemical and chemical consuming industries. These trends directly affect the future structure of the chemicals customer market and the industry is seeing large/new investments. Chemical companies need to be aware of which customer industries are most affected by these trends and what it will take to meet their needs.

Chemicals companies and their industrial customers have been building cash reserves since the recession of 2008-09. The thrift mindset resulted from uncertainty about the future, and company leaders have been waiting for clear signals of growth. A less discussed factor, however, is that senior executives are having a hard time pinpointing the best places in which to invest.

Anticipating $7.6 trillion in capital projects in the next five years, chemicals leaders weigh multiple factors throughout the world. This report examines key criteria leaders use to locate new plants and pursue high performance.

Key Findings

Accenture describes key factors in locating new plants:

Expectations of exchange rates

Total labor costs

Innovation ecosystems

Materials and energy costs

Logistics/customer proximity and rule of law

Manufacturers are starting with the premise of building where demand is, unless they find a compelling reason to go offshore. China will continue as a global manufacturing powerhouse, but North America is expected to enjoy a higher rate, 21 percent, of industrial growth. Europe is projected to account for about 11 percent of new project spending, with Latin America trailing at 2 percent.

Analysis

To pursue high performance, industrial leaders are expected to:

Invest in automation. Whether improving processes or using robots in batch process and rubber/plastics manufacturing, the ability to increase high-quality output with less labor is the essence of competitiveness.

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